Introduction

Everyone benefits from a transportation system that works efficiently and effectively.

The U.S. government has played a continuous role in the transportation sector throughout its history. To better coordinate the government's transportation activities, in 1966, President Johnson created the U.S. Department of Transportation (DOT). Today DOT houses various government transportation programs, such as the Federal Aviation Administration, the Federal Highway Trust Fund and the U.S. Maritime Administration. Altogether DOT includes 13 sub-agencies covering a range of transportation modes, such as: aviation, highways, maritime, motor carriers, pipeline safety, and public transit and railroads.

DOT's mission is to "serve the United States by ensuring a fast, safe, efficient, accessible and convenient transportation system that meets our vital national interests and enhances the quality of life of the American people, today and into the future." Expanding on this mission, DOT's strategic goals (PDF) are to: "improve safety; protect the environment; support national security, preparedness and response; reduce congestion for all Americans; and increase global transportation connectivity in support of the Nation's Economy."

In addition to the DOT's programs, the federal government carries out some transportation-related activities through the Department of Homeland Security, which includes the U.S. Coast Guard and other programs for transportation security. The Export-Import Bank of the United States, which helps finance the exports of American goods and services, is also active in the transportation sector. In fiscal 2008, it guaranteed nearly $5.7 billion in long-term, transportation-related loans in 17 countries, mostly for commercial aircraft.

Government Funding of Transportation Services

Subsidyscope examines four different categories of government subsidies, which are based on how the federal government delivers subsidies to recipients.

1. Direct expenditures include direct transfers of money (e.g. cash grants) or goods and services (e.g., donation of government surplus). This does not include contracts for goods and services which are covered in a separate category below.
2. Tax expenditures provide tax relief to certain parties by allowing special tax exemptions, deductions, credits or exclusions of income.
3. Risk transfers convey financial risk to the federal government through insurance contracts, loans, loan guarantees and similar instruments.
4. Government contracts may also be used to encourage or change market behavior by paying for goods or services at prices above fair market value. For instance, the federal procurement system includes preferences for everything from alternative fuel vehicles to minority-owned businesses.

*Appropriations figures were substituted for missing rail data. Does not include Maritime spending from 2000-2004.

It is important to note two things about these categories. First, they are not exhaustive. The federal government uses other tools to provide subsidies, notably regulations, tariffs and negative subsidies (such as excise taxes), but Subsidyscope currently focuses on the four categories described above. Second, not all government spending is subsidy spending, and not all spending on subsidy programs counts as a subsidy. The actual subsidy a recipient receives is the net benefit they receive from the program. The cost of administering a subsidy program, for instance, does not directly benefit a recipient.

In general, federal spending on the transportation sector is dominated by direct expenditures. In FY08, the federal government spent $42.7 billion on grants and other direct expenditures (excluding contracts) for transportation related activities. Some of the larger direct expenditure programs include the Airport Improvement Program and the Essential Air Service program, highway funding, the Maritime Security Program, Amtrak and public transit. Total spending on these six programs reaches roughly $41 billion per year.

There are only a handful of transportation related tax expenditures. Adding up the Department of Treasury's estimates — which are presented by the Office of Management and Budget in the President's Budget — results in a total of approximately $3.7 billion in revenue foregone due to transportation related tax expenditures in fiscal year 2008, as listed below:

Tax expenditure data presented are estimates of revenue forgone. They represent the lost revenue attributable to the use of the provision, which is not necessarily the same as what would be raised if the tax expenditure was repealed. Summing tax expenditures is not quite kosher, but it often provides a reasonably good ballpark estimate for the total value of groups of tax expenditures. The repeal of any single tax expenditure can trigger behavioral effects that in turn affect other tax expenditure amounts or even the total amount of tax revenue flowing into the Treasury. For example, if the tax expenditure favoring employee parking is repealed, more taxpayers may take the tax expenditure for employee transit passes, thus increasing the estimate for that tax expenditure.

The President's Budget for fiscal year 2010 estimates that transportation related loans and loan guarantees were about $1 billion in 2008 — with a subsidy of $154 million. For 2009, the projections are higher, at $3.7 billion in loans and loan guarantees, of which $266 million is a subsidy. For more on the use of risk transfers as a policy tool, and why these numbers are a lower bound, click here.